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Failure to prioritise procurement 'will cost businesses'

11 January 2012

Businesses have been warned that a failure to place the proper emphasis on procurement issues could create financial problems further down the line.

Procurement consultancy Efficio said companies that cut back on their purchasing staff and capabilities are likely to see the cost of their third-party supplies increasing over the next 12 to 18 months.

Loss of procurement resources is typically associated with a six to ten per cent rise in costs for indirect categories and two to five per cent for direct categories, which could lead to severe business disruption.

Efficio vice president Juraj Priecel said: "When procurement professionals are no longer there to keep an eye on contracts, deal with suppliers day-to-day, renegotiate deals where necessary and monitor the supplier markets, cost increases will result as night follows day."

The consultancy noted that conversely, increased investment in procurement can lead to long-term savings of millions.

Last month, a report from Everest Group revealed that procurement outsourcing among global businesses is likely to increase in 2012.

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Categories: Functional Practices

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